Keynes’ Grandchildren and Easterlin’s Paradox: What Is Keeping Us from Reducing Our Working Hours?

Johannes Hirata ()
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Johannes Hirata: Hochschule Osnabrück, University of Applied Sciences

Chapter Chapter 13 in The Economics of Happiness, 2019, pp 303-317 from Springer

Abstract: Abstract In1930 Keynes famously predicted that 100 years later—i.e. in 2030—the “economic problem” would be solved and we would be living in an “age of leisure and of abundance” working only 3 h a day. In the same text, Keynes stated that there are absolute and relative needs (“in the sense that we feel them only if their satisfaction lifts us above, makes us feel superior to, our fellows”), but he thought that relative needs are of minor importance. Richard Easterlin’s work, on the other hand, suggests that relative needs are pervasive and that wellbeing depends much more on one’s relative income than Keynes once thought. It will be argued in this text that Richard Easterlin’s findings, in spite of proving Keynes off the mark in his understatement of relative needs, strengthens the case for working time reductions: the larger the proportion of goods subject to the relative-income effect, the greater are the benefits of working fewer hours. Perhaps the main explanation for why we are still sticking to the 40-h work-week is that the Easterlin paradox has not been widely understood yet.

Keywords: Easterlin paradox; Economic growth; Relative-income effect; Hedonic adaptation; Labor supply; Leisure (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/978-3-030-15835-4_13

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